The Crude Oil and Petroleum Express: Industry Group Reports Increase in Rail Shipments

Article excerpt

Crude oil and petroleum product shipments by rail increased dramatically in 2012, according to an industry trade group. That boost was due in part to crude oil from North Dakota's Bakken Shale rock formation, where Oklahoma City driller Continental Resources is a major player.

Continental and other drillers use trains to ship crude from the Bakken because there isn't enough pipeline capacity to match the growth in production. One economist said companies can manage infrastructure costs by careful planning.

According to the Association of American Railroads, crude and other petroleum products shipped by rail in 2012 increased by 46 percent compared to 2011. In 2009, crude oil made up only 3 percent of petroleum products delivered by train. By 2012, crude comprised 38 percent of petroleum products delivered by train.

Though crude shipments from North Dakota by train are increasing, companies such as Continental can make more money per barrel than if the commodity were shipped through a pipeline, depending on the destination. Jeff Hume, vice chairman of strategic growth initiatives at Continental, said the company is shipping crude by rail to St. James, La.; Seattle; Philadelphia; and Albany, N.Y., and by pipeline to Wyoming and Minnesota.

"We're actually making money by rail over piping it," Hume said. "We are paying more for transportation, but I'm going to better markets. …